The influence of organizational justice on the perceived likelihood of whistle-blowing

Abstract

This research effort contributes to the extant accounting literature by examining, in an experimental setting, the perceived likelihood of employees internally reporting fraud in response to fair or unfair whistle-blowing procedures (procedural justice), interactions with management (interactional justice), and outcomes (distributive justice). Whistle-blowing within the organization (internal) versus outside the organization (external) is of interest because it enhances corporate governance by allowing for the non-public resolution of ethical violations (Sarbanes-Oxley 2002; Hooks et al. 1994; Miceli and Near 1992). Participants in this study included two hundred seventy-three internal auditors who were members of the Institute of Internal Auditors (IIA) and 244 four management accountants who were members of the Institute of Management Accountants (IMA). A positive relationship was predicted and found between fair whistle-blowing procedures and an increase in the perceived likelihood of reporting wrongdoing. The same relationship was found for fair interactions with management during whistle-blowing and fair outcomes (i.e., the cessation of the reported wrongdoing); The highest perceived likelihood of reporting was posited and found when all whistleblowing circumstances were fair; and, the converse was predicted and found when all whistle-blowing circumstances were unfair. In mixed fairness whistle-blowing situations, a higher perceived likelihood of reporting was expected and found when outcomes were fair versus when they were not. A comparison of the responses of management accountants and internal auditors across the individual justice circumstances unexpectedly revealed that the overall perceived likelihood of reporting did not significantly vary between internal auditors and management accountants. Management accountants indicated a significantly higher likelihood of reporting than internal auditors in only one circumstance -- interactionally fair whistle-blowing. Management accountants may have been seeking interactional fairness to allay fears of retribution since they are less likely than internal auditors to be protected by their job role.

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